II 

115TH CONGRESS 

1ST SESSION S. 1549 

To amend the Internal Revenue Code of 1986 to provide a safe harbor 

for determinations of worker classification, to require increased reporting, 

and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 13, 2017 

Mr. THUNE introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

a safe harbor for determinations of worker classification, 

to require increased reporting, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘New Economy Works 

5 to Guarantee Independence and Growth Act of 2017’’ or 

6 the ‘‘NEW GIG Act of 2017’’. 


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1 SEC. 2. DETERMINATION OF WORKER CLASSIFICATION. 

2 (a) IN GENERAL.—Chapter 79 of the Internal Rev3 enue Code of 1986 is amended by adding at the end the 

4 following new section: 

5 ‘‘SEC. 7706. DETERMINATION OF WORKER CLASSIFICATION. 

6 ‘‘(a) IN GENERAL.—For purposes of this title (and 

7 notwithstanding any provision of this title not contained 

8 in this section to the contrary), if the requirements of sub9 sections (b), (c), and (d) are met with respect to any serv10 ice performed by a service provider, then with respect to 

11 such service— 

12 ‘‘(1) the service provider shall not be treated as 

13 an employee, 

14 ‘‘(2) the service recipient shall not be treated as 

15 an employer, 

16 ‘‘(3) any payor shall not be treated as an em17 ployer, and 

18 ‘‘(4) the compensation paid or received for such 

19 service shall not be treated as paid or received with 

20 respect to employment. 

21 ‘‘(b) GENERAL SERVICE PROVIDER REQUIRE22 MENTS.— 

23 ‘‘(1) IN GENERAL.—The requirements of this 

24 subsection are met with respect to any service if the 

25 service provider either— 


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1 ‘‘(A) meets the requirements of paragraph 

2 (2) with respect to such service, or 

3 ‘‘(B) in the case of a service provider en4 gaged in the trade or business of selling (or so5 liciting the sale of) goods or services, meets the 

6 requirements of paragraph (3) with respect to 

7 such service. 

8 ‘‘(2) GENERAL REQUIREMENTS.— 

9 ‘‘(A) IN GENERAL.—The requirements of 

10 this paragraph are met with respect to any 

11 service if the service provider, in connection 

12 with performing the service— 

13 ‘‘(i) incurs expenses— 

14 ‘‘(I) which are deductible under 

15 section 162, and 

16 ‘‘(II) a significant portion of 

17 which are not reimbursed, 

18 ‘‘(ii) agrees to perform the service for 

19 a particular amount of time, to achieve a 

20 specific result, or to complete a specific 

21 task, and 

22 ‘‘(iii) satisfies not less than one of the 

23 factors described in subparagraph (B). 

24 ‘‘(B) FACTORS.—The factors described in 

25 this subparagraph are the following: 


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1 ‘‘(i) The service provider has a signifi2 cant investment in assets or training which 

3 are applicable to the service performed. 

4 ‘‘(ii) The service provider is not re5 quired to perform services exclusively for 

6 the service recipient or payor. 

7 ‘‘(iii) The service provider has not 

8 been treated as an employee by the service 

9 recipient or payor during the 1-year period 

10 ending with the date of the commencement 

11 of services under the contract described in 

12 subsection (d). 

13 ‘‘(iv) The service provider is not com14 pensated on a basis which is tied primarily 

15 to the number of hours actually worked. 

16 ‘‘(3) ALTERNATIVE REQUIREMENTS WITH RE17 SPECT TO SALES PERSONS.—In the case of a service 

18 provider engaged in the trade or business of selling 

19 (or soliciting the sale of) goods or services, the re20 quirements of this paragraph are met with respect 

21 to any service provided in the ordinary course of 

22 such trade or business if— 

23 ‘‘(A) the service provider is compensated 

24 primarily on a commission basis, and 


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1 ‘‘(B) substantially all the compensation for 

2 such service is directly related to sales of goods 

3 or services rather than to the number of hours 

4 worked. 

5 ‘‘(c) PLACE OF BUSINESS OR OWN EQUIPMENT RE6 QUIREMENT.—The requirement of this subsection is met 

7 with respect to any service if the service provider— 

8 ‘‘(1) has a principal place of business, 

9 ‘‘(2) does not provide the service primarily in 

10 the service recipient’s place of business, 

11 ‘‘(3) pays a fair market rent for use of the serv12 ice recipient’s place of business, or 

13 ‘‘(4) provides the service primarily using equip14 ment supplied by the service provider. 

15 ‘‘(d) WRITTEN CONTRACT REQUIREMENT.—The re16 quirements of this subsection are met with respect to any 

17 service if such service is performed pursuant to a written 

18 contract between the service provider and the service re19 cipient (or payor) which meets the following requirements: 

20 ‘‘(1) The contract includes each of the fol21 lowing: 

22 ‘‘(A) The service provider’s name, taxpayer 

23 identification number, and address. 

24 ‘‘(B) A statement that the service provider 

25 will not be treated as an employee with respect 


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1 to the services provided pursuant to the con2 tract for purposes of this title. 

3 ‘‘(C) A statement that the service recipient 

4 (or the payor) will withhold upon and report to 

5 the Internal Revenue Service the compensation 

6 payable pursuant to the contract consistent 

7 with the requirements of this title. 

8 ‘‘(D) A statement that the service provider 

9 is responsible for payment of Federal, State, 

10 and local taxes, including self-employment 

11 taxes, on compensation payable pursuant to the 

12 contract. 

13 ‘‘(E) A statement that the contract is in14 tended to be considered a contract described in 

15 this subsection. 

16 ‘‘(2) The term of the contract does not exceed 

17 2 years. The preceding sentence shall not prevent 

18 one or more subsequent written renewals of the con19 tract from satisfying the requirements of this sub20 section if the term of each such renewal does not ex21 ceed 2 years and if the information required under 

22 paragraph (1)(A) is updated in connection with each 

23 such renewal. 

24 ‘‘(3) The contract (or renewal) is signed (which 

25 may include signatures in electronic form) by both 


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1 the service recipient (or payor) and the service pro2 vider not later than the date on which the aggregate 

3 payments made by the service recipient (or payor) to 

4 the service provider exceeds $1,000 for the year cov5 ered by the contract (or renewal). 

6 ‘‘(e) REPORTING REQUIREMENTS.— 

7 ‘‘(1) IN GENERAL.—For purposes of making 

8 any determination with respect to the liability of a 

9 service recipient or payor for any tax during any 

10 taxable year with respect to a service provider, the 

11 application of this section shall be conditioned on ei12 ther the service recipient or the payor satisfying the 

13 reporting requirements applicable to such service re14 cipient or payor under section 6041(a), 6041A(a), or 

15 6050W with respect to such service provider for 

16 such period. 

17 ‘‘(2) REASONABLE CAUSE.—For purposes of 

18 paragraph (1), such reporting requirements shall be 

19 treated as met if the failure to satisfy such require20 ments is due to reasonable cause and not willful ne21 glect. 

22 ‘‘(f) EXCEPTION FOR SERVICES PROVIDED BY

23 OWNER.—This section shall not apply with respect to any 

24 service provided by a service provider to a service recipient 

25 if the service provider owns any interest in the service reVerDate Sep 11 2014 05:50 Jul 22, 2017 Jkt 069200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1549.IS S1549

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1 cipient or any payor with respect to the service provided. 

2 The preceding sentence shall not apply in the case of a 

3 service recipient the stock of which is regularly traded on 

4 an established securities market. 

5 ‘‘(g) EXCEPTION FOR PERSONAL SERVICES.— 

6 ‘‘(1) IN GENERAL.—This section shall not apply 

7 with respect to any service provided for the personal 

8 purposes of the service recipient. 

9 ‘‘(2) LIMITATION.—Paragraph (1) shall not 

10 apply in the case of any services provided to a serv11 ice recipient who is not the payor. 

12 ‘‘(h) LIMITATION ON RECLASSIFICATION BY SEC13 RETARY.—For purposes of this title— 

14 ‘‘(1) EFFECT OF RECLASSIFICATION ON SERV15 ICE RECIPIENTS AND PAYORS.—A determination by 

16 the Secretary that a service recipient or a payor 

17 should have treated a service provider as an em18 ployee shall be effective with respect to the service 

19 recipient or payor no earlier than the notice date 

20 if— 

21 ‘‘(A) the service recipient or the payor en22 tered into a written contract with the service 

23 provider which meets the requirements of sub24 section (d), 


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1 ‘‘(B) the service recipient or the payor sat2 isfied the applicable reporting requirements of 

3 section 6041(a), 6041A(a), or 6050W for all 

4 relevant taxable years with respect to the serv5 ice provider, 

6 ‘‘(C) the service recipient or the payor col7 lected and paid over all applicable taxes im8 posed under subtitle C for all relevant taxable 

9 years with respect to the service provider, and 

10 ‘‘(D) the service recipient or the payor 

11 demonstrates a reasonable basis for having de12 termined that the service provider should not be 

13 treated as an employee under this section and 

14 that such determination was made in good 

15 faith. 

16 ‘‘(2) EFFECT OF RECLASSIFICATION ON SERV17 ICE PROVIDERS.—A determination by the Secretary 

18 that a service provider should have been treated as 

19 an employee shall be effective with respect to the 

20 service provider no earlier than the notice date if— 

21 ‘‘(A) the service provider entered into a 

22 written contract with the service recipient or 

23 payor which meets the requirements of sub24 section (d), 


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1 ‘‘(B) the service provider satisfied the ap2 plicable reporting requirements of sections 

3 6012(a) and 6017 for all relevant taxable years 

4 with respect to the service recipient or payor, 

5 and 

6 ‘‘(C) the service provider demonstrates a 

7 reasonable basis for determining that the serv8 ice provider is not an employee under this sec9 tion and that such determination was made in 

10 good faith. 

11 ‘‘(3) NOTICE DATE.—For purposes of this sub12 section, the term ‘notice date’ means the 30th day 

13 after the earliest of— 

14 ‘‘(A) the date on which the first letter of 

15 proposed deficiency which allows the service 

16 provider, the service recipient, or the payor an 

17 opportunity for administrative review in the In18 ternal Revenue Service Office of Appeals is 

19 sent, 

20 ‘‘(B) the date on which a deficiency notice 

21 under section 6212 is sent, or 

22 ‘‘(C) the date on which a notice of deter23 mination under section 7436(b)(2) is sent. 

24 ‘‘(4) REASONABLE CAUSE EXCEPTION.—The re25 quirements of paragraphs (1)(B) and (2)(B) shall be 


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1 treated as met if the failure to satisfy such require2 ments is due to reasonable cause and not willful ne3 glect. 

4 ‘‘(5) NO RESTRICTION ON ADMINISTRATIVE OR

5 JUDICIAL REVIEW.—Nothing in this subsection shall 

6 be construed as limiting any provision of law which 

7 provides an opportunity for administrative or judi8 cial review of a determination by the Secretary. 

9 ‘‘(i) RULE OF CONSTRUCTION.—Nothing in this sec10 tion shall be construed as— 

11 ‘‘(1) limiting the ability or right of a service 

12 provider, service recipient, or payor to apply any 

13 other provision of this title, section 530 of the Rev14 enue Act of 1978, or any common law rules for de15 termining whether an individual is an employee, or 

16 ‘‘(2) establishing a prerequisite for the applica17 tion of any provision of law described in paragraph 

18 (1). 

19 ‘‘(j) DEFINITIONS.—For purposes of this section— 

20 ‘‘(1) SERVICE PROVIDER.— 

21 ‘‘(A) IN GENERAL.—The term ‘service pro22 vider’ means any qualified person who performs 

23 service for another person. 

24 ‘‘(B) QUALIFIED PERSON.—The term 

25 ‘qualified person’ means— 


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1 ‘‘(i) any natural person, or 

2 ‘‘(ii) any entity if any of the services 

3 referred to in subparagraph (A) are per4 formed by one or more natural persons 

5 who directly own interests in such entity. 

6 ‘‘(2) SERVICE RECIPIENT.—The term ‘service 

7 recipient’ means the person for whom the service 

8 provider performs such service. 

9 ‘‘(3) PAYOR.—The term ‘payor’ means— 

10 ‘‘(A) any person, including the service re11 cipient, who pays the service provider for per12 forming such service, or 

13 ‘‘(B) any third party settlement organiza14 tion, as defined in section 6050W(b)(3). 

15 ‘‘(k) REGULATIONS.—Notwithstanding section 

16 530(d) of the Revenue Act of 1978, the Secretary shall 

17 issue such regulations as the Secretary determines are 

18 necessary to carry out the purposes of this section.’’. 

19 (b) WITHHOLDING BY PAYOR IN CASE OF CERTAIN

20 PERSONS CLASSIFIED AS NOT EMPLOYEES.—Section 

21 3402 of the Internal Revenue Code of 1986 is amended 

22 by redesignating subsection (s) as subsection (t) and in23 serting after subsection (r) the following new subsection: 


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1 ‘‘(s) EXTENSION OF WITHHOLDING TO PAYMENTS

2 TO CERTAIN PERSONS CLASSIFIED AS NOT EMPLOY3 EES.— 

4 ‘‘(1) IN GENERAL.—For purposes of this chap5 ter and so much of subtitle F as relates to this chap6 ter, compensation paid pursuant to a contract de7 scribed in section 7706(d) shall be treated as if it 

8 were a payment of wages by an employer to an em9 ployee. 

10 ‘‘(2) AMOUNT WITHHELD.—Except as otherwise 

11 provided under subsection (i), the amount to be de12 ducted and withheld pursuant to paragraph (1) with 

13 respect to compensation paid pursuant to any such 

14 contract during any calendar year shall be an 

15 amount equal to 5 percent of so much of the amount 

16 of such compensation as does not exceed $20,000.’’. 

17 (c) DIRECT SELLERS OF PROMOTIONAL PROD18 UCTS.—Subsection (b) of section 3508 is amended— 

19 (1) in paragraph (2)(A)— 

20 (A) in clause (ii), by striking ‘‘or’’ at the 

21 end; 

22 (B) in clause (iii), by adding ‘‘or’’ at the 

23 end; and 

24 (C) by inserting after clause (iii) the fol25 lowing new clause: 


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1 ‘‘(iv) is engaged in the trade or busi2 ness of selling, or soliciting the sale of, 

3 promotional products from other than a 

4 permanent retail establishment,’’; 

5 (2) by redesignating paragraph (3) as para6 graph (4); and 

7 (3) by inserting after paragraph (2) the fol8 lowing new paragraph: 

9 ‘‘(3) PROMOTIONAL PRODUCT.—For purposes 

10 of paragraph (2)(A)(iv), the term ‘promotional prod11 uct’ means a tangible item with permanently marked 

12 promotional words, symbols, or art of the pur13 chaser.’’. 

14 (d) REPORTING.— 

15 (1) INFORMATION AT SOURCE.—Section 6041 

16 of the Internal Revenue Code of 1986 is amended— 

17 (A) in subsection (a)— 

18 (i) in the heading, by striking ‘‘$600’’ 

19 and inserting ‘‘$1,000’’; and 

20 (ii) by striking ‘‘$600 or more in any 

21 taxable year’’ and inserting ‘‘$1,000 or 

22 more in any taxable year’’; and 

23 (B) by adding at the end the following new 

24 subsection: 


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1 ‘‘(h) SPECIAL RULES FOR CERTAIN PERSONS CLAS2 SIFIED AS NOT EMPLOYEES.— 

3 ‘‘(1) IN GENERAL.—In the case of any service 

4 recipient or payor required to make a return under 

5 subsection (a) with respect to compensation to which 

6 section 7706(a) applies— 

7 ‘‘(A) such return shall include— 

8 ‘‘(i) the aggregate amount of such 

9 compensation paid to each person whose 

10 name is required to be included on such re11 turn, 

12 ‘‘(ii) the aggregate amount deducted 

13 and withheld under section 3402(s) with 

14 respect to such compensation, and 

15 ‘‘(iii) an indication of whether a copy 

16 of the contract described in section 

17 7706(d) is on file with the service recipient 

18 or payor, and 

19 ‘‘(B) the statement required to be fur20 nished under subsection (d) shall include the in21 formation described in subparagraph (A) with 

22 respect to the service provider to whom such 

23 statement is furnished. 

24 ‘‘(2) DEFINITIONS.—Terms used in this sub25 section which are also used in section 7706 shall 


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1 have the same meaning as when used in such sec2 tion.’’. 

3 (2) RETURNS REGARDING PAYMENTS OF REMU4 NERATION FOR SERVICES AND DIRECT SALES.—Sec5 tion 6041A of such Code is amended— 

6 (A) in paragraph (2) of subsection (a), by 

7 striking ‘‘$600’’ and inserting ‘‘$1,000’’; and 

8 (B) by adding at the end the following new 

9 subsection: 

10 ‘‘(g) SPECIAL RULES FOR CERTAIN PERSONS CLAS11 SIFIED AS NOT EMPLOYEES.—Rules similar to the rules 

12 of subsection (h) of section 6041 shall apply for purposes 

13 of this section.’’. 

14 (3) RETURNS RELATING TO PAYMENTS MADE

15 IN SETTLEMENT OF PAYMENT CARD AND THIRD

16 PARTY NETWORK TRANSACTIONS.—Section 6050W 

17 of such Code is amended— 

18 (A) in subsection (d), by amending para19 graph (3) to read as follows: 

20 ‘‘(3) THIRD PARTY NETWORK.— 

21 ‘‘(A) IN GENERAL.—The term ‘third party 

22 payment network’ means any agreement or ar23 rangement— 

24 ‘‘(i) which involves the establishment 

25 of accounts with a central organization or 


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1 marketplace platform by a substantial 

2 number of persons who— 

3 ‘‘(I) are unrelated to such organi4 zation or platform, 

5 ‘‘(II) provide goods or services, 

6 and 

7 ‘‘(III) have agreed to settle 

8 transactions for the provision of such 

9 goods or services pursuant to such 

10 agreement or arrangement, 

11 ‘‘(ii) which provides for standards and 

12 mechanisms for settling such transactions, 

13 and 

14 ‘‘(iii) which guarantees persons pro15 viding goods or services pursuant to such 

16 agreement or arrangement that such per17 sons will be paid for providing such goods 

18 or services. 

19 ‘‘(B) EXCEPTION.—The term ‘third party 

20 payment network’ shall not include any agree21 ment or arrangement which provides for the 

22 issuance of payment cards. 

23 ‘‘(C) MARKETPLACE PLATFORM.—For pur24 poses of subparagraph (A), the term ‘market25 place platform’ means any person who— 


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1 ‘‘(i) operates a digital website or mo2 bile application that facilitates the provi3 sion of goods or services by providers to re4 cipients, 

5 ‘‘(ii) enters into an agreement with 

6 each provider stating that such provider 

7 will not be treated as an employee with re8 spect to such goods or services, 

9 ‘‘(iii) provides standards and mecha10 nisms for settling such facilitated trans11 actions, and 

12 ‘‘(iv) guarantees each provider of 

13 goods or services pursuant to such agree14 ment that the provider will be paid for 

15 such facilitated transaction.’’; 

16 (B) by amending subsection (e) to read as 

17 follows: 

18 ‘‘(e) EXCEPTION FOR DE MINIMIS PAYMENTS BY

19 THIRD PARTY SETTLEMENT ORGANIZATIONS.— 

20 ‘‘(1) IN GENERAL.—A third party settlement 

21 organization shall be required to report any informa22 tion under subsection (a) with respect to third party 

23 network transactions of any participating payee only 

24 if the amount which would otherwise be reported 


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1 under subsection (a)(2) with respect to such trans2 actions exceeds $1,000. 

3 ‘‘(2) ELECTION TO REPORT.—Notwithstanding 

4 paragraph (1), a third party settlement organization 

5 may elect to report any information under sub6 section (a) with respect to third party network 

7 transactions of any participating payee for which the 

8 amount reported under subsection (a)(2) with re9 spect to such transactions is equal to or less than 

10 $1,000.’’; and 

11 (C) in subsection (f)— 

12 (i) in paragraph (1), by striking 

13 ‘‘and’’ at the end; 

14 (ii) in paragraph (2), by striking the 

15 period at the end and inserting ‘‘, and’’; 

16 and 

17 (iii) by inserting after paragraph (2) 

18 the following new paragraph: 

19 ‘‘(3) the amount, if any, withheld pursuant to 

20 section 3402(s).’’. 

21 (e) PROCEEDINGS FOR DETERMINATION OF EMPLOY22 MENT STATUS.—Paragraph (1) of section 7436(b) of the 

23 Internal Revenue Code of 1986 is amended to read as fol24 lows: 


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1 ‘‘(1) PETITIONER.—A pleading may be filed 

2 under this section only by— 

3 ‘‘(A) the person for whom the services are 

4 performed, or 

5 ‘‘(B) any service provider (as defined in 

6 section 7706(j)(1)) which the Secretary has de7 termined should have been treated as an em8 ployee.’’. 

9 (f) CLERICAL AMENDMENT.—The table of sections 

10 for chapter 79 of the Internal Revenue Code of 1986 is 

11 amended by adding at the end the following new item: 

‘‘Sec. 7706. Determination of worker classification.’’. 

12 (g) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to services performed after Decem14 ber 31, 2017 (and to payments made for such services 

15 after such date). 

Æ 


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